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Employees can retrospectively switch annual leave to sick leave rules ECJ

16 September 2009

Employees who cannot take their holiday entitlement because of sickness, or who are sick during their holiday, must be allowed to take their holiday at some other time, the European Court of Justice (ECJ) has ruled.

The ECJs decision follows the Stringer case earlier this year where the court ruled that an employee who could not take annual leave due to continuous sickness absence could carry their holiday entitlement over to the next holiday year under the working time directive. However, it did not tackle the issue of what happens if sickness absence coincides with planned annual leave which was the subject of the case Pereda v Madrid Movilidad SA.

The facts of the case

In the case of Pereda v Madrid Movilidad SA, Mr Pereda was scheduled to take holiday but was involved in an accident shortly before it was due to start and was subsequently unable to work. He asked for a new period of annual leave but his employer refused.

What was the ECJ asked to consider?

The ECJ was asked whether, when a period of annual leave coincides with a temporary disability following an accident at work, the employee may change his period of leave, if necessary, to another leave year.

And the decision?

The ECJ ruled that an employee on sick leave during a period of previously scheduled annual leave has the right, on request after returning from the absence, to take that annual leave at another time. If the employee cannot take this re-scheduled leave in the particular leave year, they are entitled to carry that forward into the next leave year.

The ECJs rationale was that the purpose of annual leave - "to rest and enjoy a period of relaxation and leisure" - was different from the purpose of sick leave - "to recover from being ill".

Implications?

The decision as to whether annual leave is taken during sick leave is now one for the employee, not the employer - if the employee does not wish to take annual leave whilst off sick, that leave must be granted at another time. This can include a request to take the leave in a subsequent leave year and could therefore mean annual leave accrues over a number of years.

Employees may then take this accrued leave on their return to work or receive payment in lieu on the termination of their employment, which may lead employers to consider earlier dismissal than at present to avoid the accrual of annual leave.

It appears that Mr Pereda applied for a new period of annual leave over a month after his return to work. If this is correct, employees would not need to cancel their booked annual leave if they become sick, but could exercise their right to reschedule that leave at a later date.

This may make little difference to those employers who do not pay more than statutory sick pay, or only do so for a limited period. Employees of such employers probably would not want to switch annual leave to sick leave. However, employers with generous sick pay schemes are likely to see an increase in retrospective claims of illness while on holiday, which in many cases may be unverifiable.

As a result, employers may consider reviewing their sick pay schemes and may wish to revisit their sickness absence policies to require notification of any sickness absence whilst an employee is on holiday and/or to require a doctors certificate in these circumstances.

If you would like to read our previous bulletin on the Stringer case, please click here.

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